The rating affirmations reflect SAVA Re's strong consolidated risk-adjusted capitalization, good operating performance and solid business profile in Slovenia's insurance market. A partly offsetting rating factor is Sava Re's exposure to the challenging operating market conditions in Slovenia and the West Balkans region.
AM Best expects SAVA Re's consolidated risk-adjusted capitalization to remain strong in 2016, supported by solid earnings retention and a cautious growth strategy.
The SAVA Re Group reported a pre-tax profit of EUR 20 million for the first six months of 2016 compared with the EUR 22 million produced in the same period of the previous year. The group's focus on underwriting discipline, combined with foreign exchange rate movements returning to a normalized level, supported the improvement in the combined ratio to 96.1% for the first half of 2016 (first half of 2015: 97.0%). In the absence of a major loss event occurring in the remaining quarter of 2016, AM Best expects SAVA Re's net earnings in 2016 to be similar to the post-tax profits of EUR 30 million reported for the full year of 2015.
The merger of SAVA Re's four European-based subsidiaries, which completed on November 2nd 2016, is expected to result in annual cost synergies of approximately EUR 6 million, further enhancing the group's prospective earnings. AM Best does not have an immediate concern regarding the reorganization of SAVA Re's group operations. However, some integration risk exists.
The SAVA Re Group has a strong business profile in its core market, with a 17% market share in 2015. The group also benefits from its leading profile within the smaller insurance markets of the West Balkans and continues to develop its competitive position in the international reinsurance markets. Growth in premium volumes is expected to be modest in 2016. This reflects the impact of the challenging economic and insurance operating conditions in Slovenia, and the highly competitive international reinsurance markets.
Source: AM Best
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